On October 13th, the Securities and Futures Commission of Hong Kong announced that the initial public offering (IPO) of the tea beverage brand ‘Cha Baidao’ may have been artificially manipulated and is currently under investigation. Trading of Cha Baidao’s shares was suspended starting at 9 a.m. that day.
According to the announcement posted on the official website of the Securities and Futures Commission, the IPO of Cha Baidao may have been subjected to artificial manipulation with the intention of creating a false impression of demand for the company’s shares. During the ongoing investigation by the Securities and Futures Commission, trading of Cha Baidao’s shares has been temporarily halted.
The announcement revealed that there were two groups involved in the fraudulent activity. The Securities and Futures Commission issued restriction notices to six brokerage firms regarding the first suspicious group, prohibiting them from dealing with assets in client accounts under the names of nine entities, including Avant Team Limited, Citadel Wealth Limited, and others, with a limit of 4,379,463,215 yuan, the highest limit amount in similar cases in history. The first group is suspected of participating in a fraudulent scheme related to the IPOs of Bokang Visual Pharmaceuticals Limited and Cha Baidao.
Reports from ‘The Paper’ on October 13th indicated that funds raised from certain portions of Cha Baidao’s IPO may have been transferred to related companies based on undisclosed agreements between the listed company and these groups for financial product investments. Such agreements could have led to the covert flow of IPO funds back to the main underwriters or their affiliates.
According to ‘Jiemian News’, creating an artificial demand for shares could mislead uninformed investors. Prearranged agreements might incline investors to subscribe for new shares with the expectation of reclaiming part of their initial capital post-listing. Other investors unaware of these agreements may interpret this subscription as a signal of confidence in the company, leading to an overestimation of the actual demand for new shares.
Wang Huaitao, Director of Shanghai Xin Gu Law Firm, analyzed that undisclosed arrangements of this nature could impact the market’s assessment of new share demand and issuance prices, with risks potentially extending to post-listing transactions.
The Securities and Futures Commission responded to ‘Jiemian News’, stating that they would refrain from further comments as the investigation is ongoing.
Currently, the Securities and Futures Commission has not publicly disclosed the specific agreements, financial products, and fund allocations related to Cha Baidao. It has not determined whether the company or its management was involved in manipulation, aware of it, or participated in it, and the details of how related individuals were involved are still subject to further investigation and clarification.
The announcement from the Securities and Futures Commission stated, “Trading of Sichuan Cha Baidao Industrial Co., Ltd. (Cha Baidao) shares has been suspended starting from 9:00 a.m. today.”
Public records show that Cha Baidao is a Chinese chain of freshly made tea beverage brand belonging to Sichuan Cha Baidao Industrial Co., Ltd., located in Chengdu, Sichuan Province, mainly engaged in selling tea beverages and equipment. By the end of 2025, Cha Baidao had 8,621 stores nationwide.
Cha Baidao went public on the Hong Kong Stock Exchange on April 23, 2024, becoming the “first listed franchise tea beverage company.” It experienced a first-day drop in stock price by over 26%, leading to a nearly 70 billion Hong Kong dollar market value evaporation.
As of October 12th, Cha Baidao closed at 4.035 Hong Kong dollars, a nearly 77% decline from the IPO price of 17.5 Hong Kong dollars. Its stock price has dropped by over 36% since the beginning of the year, with a market value of 6 billion Hong Kong dollars.